SI CHI01130.427 (WI) Wisconsin Prepaid Burial Agreements and Burial Trusts (TN 364 - 12/2003)
A. National Policy
1. General Policy Principles
Burial funds exclusion: Funds designated as set aside for the funeral and burial expenses of the individual or the individual's spouse are subject to a maximum exclusion of $1,500. The maximum is reduced by any amount held in an irrevocable agreement for funeral or burial expenses (SI 01130.410).
Burial space exclusion: A burial space or agreement which represents the purchase of a burial space held for the burial of the individual, his or her spouse, or any member of his or her immediate family is excluded, regardless of value. If an individual owns items such as a casket or gravesite, all of the items may be excluded under the burial space exclusion. The agreement must represent the individual's ownership of and right to a burial space. This exclusion is in addition to, and has no effect on, the burial funds exclusion (SI 01130.400).
2. Operating Policies
“Prepaid burial agreement” is a generic term that includes contracts, trusts, escrow accounts, and similar instruments that purport to prepay for funeral or burial merchandise or services to dispose of the human body after death.
A revocable or assignable agreement designated solely for funeral and burial expenses is a resource subject to the burial funds exclusion. An irrevocable, unassignable agreement, although not a resource, reduces the amount of the maximum burial funds exclusion (SI 01130.410B.1 & SI 01130.410C.1.b, SI 01130.420C.4).
A revocable or assignable agreement designated solely for the purchase of burial space is a resource subject to the burial space exclusion. If the agreement is irrevocable and unassignable, it is not a resource (SI 01130.400C.4, SI 01130.420C.3).
If an agreement includes both burial funds and the purchase of a burial space, the portion representing the burial space purchase is subject to the burial space exclusion. This applies as long as the agreement distinguishes the burial space purchase from the burial funds. The burial funds portion is subject to the burial funds exclusion. If the burial space portion is not sufficiently identified or the items are not currently being held for the individual, the entire agreement is considered burial funds.
If a combined agreement designates which portion is irrevocable and which is not, that designation is controlling. The irrevocable portion may, however, be subject to State law that sets a limit on the amount that may be made irrevocable. If the agreement does not designate which part is irrevocable, and the value of the agreement exceeds the State statutory limit, the State statutory limit is applied to burial spaces first (SI 01130.420C.5).
B. Wisconsin State Law
1. W.S.A. 701.12
W.S.A. Chapter 701 concerns trusts generally. This chapter applies in cases where an individual does not enter into a contract with a funeral provider, as in W.S.A. 445.125 (see below), but creates a burial trust with his or her own assets (SI 01120.201H). The trustee may be a person or an entity (such as a bank). The trust must have a sufficiently identifiable beneficiary; however, such beneficiary need not be specifically named. If a trust does not name a beneficiary, it will be necessary for the Office of General Counsel (OGC) to review it. Forward a copy of the trust agreement to ARC-MOS CRSI/SSI, which will review the material and refer it to OGC. Under W.S.A. 701.12, even trusts that were intended to be irrevocable can be revoked upon written consent of the settlor and all beneficiaries. Therefore, the funds held in a burial trust meet the definition of a resource, unless the trust names a beneficiary in addition to the SSI applicant or beneficiary.
2. W.S.A. 445.125 (formerly 156.125)
This section covers prepaid burial agreements between an individual and a funeral director, cemetery organization, or any other person selling funeral or burial merchandise or services. It requires any payments made under the agreement to be placed in a trust, including interest and dividends. In this type of trust, the individual is the depositor and the funeral provider is the beneficiary. The funds must remain in the trust until either the death of the individual or the release of the funds to the depositor upon demand by written notice to the beneficiary, whichever occurs sooner.
The amount that may be considered irrevocable under this statute has increased several times, as shown below. It is not necessary that all the funds be deposited at the same time. Individuals may set up a new agreement or add to an existing agreement after the limit increases, as long as the total does not exceed the current limit. Excess, revocable amounts in the trust continue to be revocable when the limit increases. If the total value of an otherwise irrevocable agreement exceeds the State limit, the excess is revocable.
Irrevocable for the first:
July 16, 1977 - Aug. 14, 1991
Aug. 15, 1991 - Dec. 31, 2000
Jan. 1, 2001 - June 30, 2003
July 1, 2003 and thereafter
C. Revocability/Irrevocability of Prepaid Burial Agreements Under W.S.A. 445.125
In order to apply the burial funds and/or burial space exclusions to Wisconsin prepaid burial agreements, it is first necessary to determine the revocability of the agreement by looking at the terms of the agreement. If the agreement is silent, it is revocable. If the agreement indicates that it is partly or wholly irrevocable, Wisconsin State law may come into play.
1. Revocable Agreement
If the entire agreement is revocable, it is a resource subject to the possible application of the burial funds and/or burial space exclusions.
2. Partly or Wholly Irrevocable Agreement
Look at the language of the agreement to determine what amount is irrevocable. Next, determine the State statutory limit on irrevocability at the time the agreement was created (see timetable in B.1.). If the irrevocable amount is less than the statutory limit, the agreement is controlling. Apply the rules for burial funds and burial space, as appropriate. If the individual set up a new agreement or added to an existing agreement after the limit increased, the addition is irrevocable, as long as the total does not exceed the current limit.
If the irrevocable amount is greater than the statutory limit, apply the rules described below:
The statutory limit does not apply to any items listed in W.S.A. 445.125(4)(b). Exclude these items from the agreement. (As of November 1, 1991, they include cemetery lots, graves, outer burial containers preplaced into the burial excavation of a grave, cremation urns, mausoleum spaces, grave/cemetery lot markers or monuments, or undeveloped spaces. Prior to November 1, 1991, the statute listed cemetery lots, graves, burial vaults preinterred in a grave, cremation urns, crypt spaces, niches, columbaria, or grave/cemetery lot markers or monuments.) Under W.S.A. 701.12, these items are revocable. However, they are all burial spaces according to SSA and may be excluded under the burial space exclusion (SI 01130.400).
Determine whether the remainder of the agreement is for burial space, burial expenses, or both, as defined by SSA.
If the remainder of the agreement is for burial space only, the agreement is irrevocable up to the State statutory limit. This amount is not a resource. Any excess is revocable; however, the entire excess may be excluded under the burial space exclusion.
If the remainder of the agreement is for burial expenses only, it is irrevocable up to the State statutory limit. This amount is not a resource. However, the irrevocable amount reduces the burial funds exclusion. If the irrevocable amount is greater than the statutory limit, the burial funds exclusion, which would otherwise be available to any excess revocable amount, is exhausted. Therefore, the excess is a countable resource.
EXAMPLE: In 1998, the claimant entered into an agreement with a funeral home for funeral services valued at $2,300. The entire agreement was designated as irrevocable. At the time, the State statutory limit on irrevocability was $2,000. $2,000 of the agreement is irrevocable and $300 is revocable. The burial funds exclusion is not available, because the $1,500 maximum is reduced entirely by the $2,000 irrevocable portion of the agreement. Therefore, the $300 revocable portion is a countable resource. In 2001, the state limit on irrevocable agreements increased to $2,500. The $300 revocable portion remains countable. However, the individual can create a new agreement for up to $500 or add up to $500 to the existing agreement and the additional amount is also irrevocable.
If the remainder of the agreement is for both burial space and burial expenses, it is irrevocable up to the State statutory limit. Apply the statutory limit to the burial space portion first. If the burial space portion cannot be identified, treat the entire remainder as burial funds.
If the value of the burial space portion is greater than the statutory limit, the excess is revocable, but it is nevertheless excluded under the burial space exclusion. All of the burial funds portion is revocable, but the full $1,500 burial funds exclusion applies.
EXAMPLE: In 1998, the claimant entered into an agreement with a funeral home for $3,700. The entire agreement was designated as irrevocable. $200 was for items described in W.S.A. 445.125(4)(b). $2,400 was for the purchase of other burial space items and $1,100 was for burial expenses. At the time, the State statutory limit was $2,000. The $200 for the 445.125(4)(b) items is first excluded from the agreement. This amount is considered revocable and is a resource, but may be excluded under the burial space exclusion. The $2,000 statutory limit is applied to the $2,400 burial space portion first. $2,000 is irrevocable and $400 is revocable. However, this $400 may be excluded under the burial space exclusion. The $1,100 burial funds portion is revocable, but it may be excluded entirely because it is less than the $1,500 burial funds exclusion. Therefore, the claimant has no countable resources.
If the value of the burial space portion is less than the State statutory limit, all of the burial space portion and part of the burial expense portion may be irrevocable. The burial funds exclusion available to the remaining revocable burial expense portion is reduced by the amount of the irrevocable burial expense portion.
EXAMPLE: In 1998, the claimant entered into an agreement with a funeral home for $3,200. According to the agreement, $2,500 was irrevocable. $1,400 of the agreement was for burial space and $1,800 was for burial expenses. At the time, the State statutory limit was $2,000. The limit is first applied to the $1,400 burial space portion, and then to $600 of the $1,800 burial expense portion. These amounts are irrevocable and are not resources. The remaining $1,200 is revocable, and therefore, a resource. However, $900 of this amount is subject to the burial funds exclusion ($1,500 maximum burial funds exclusion reduced by $600 in irrevocable burial expenses). Therefore, the claimant has $300 in countable resources.
Effective November 26, 1981, W.S.A. 445.125 provides that any interest or dividends accruing to a trust established pursuant to an irrevocable prepaid burial agreement may be made irrevocable. In cases where the depositor has not elected to make interest or dividends irrevocable and the amount of the trust is less than the State statutory limit on irrevocability, this section does not preclude adding interest or dividends to the body of the trust to reach the statutory limit. However, this depends on the language of the contract. Two requirements must be met: (a) the agreement must specifically state that interest or dividends are to be added to the trust (this cannot be inferred); and (b) the agreement must not contain contradictory language that states or implies that the interest or dividends are available or can be withdrawn prior to the depositor's death (e.g., “Interest not withdrawn is added to the minimum to be deposited; however, accumulated interest may be withdrawn at any time.”)
2. Interest Exclusion
Any remaining revocable interest or dividends may, however, still be excluded from income (and resources), if left to accumulate. Effective November 1, 1982, interest earned on the value of excluded burial funds is excluded by federal law. Effective April 1, 1990, interest earned on the purchase of excluded burial space is also excluded by federal law. The burial funds or burial space purchase must be excluded at the time the interest is paid for the interest exclusion to apply. See SI 00830.501 for the development and documentation of interest earned on excluded burial funds and burial space.
In processing PE actions, including redeterminations, it will be necessary to redevelop the burial trust unless the SSR or prior case file material includes information adequate to establish the excludability of the trust and interest income. The issue may also be redeveloped at the CR's discretion.